HK exports to fall 4% in 2019: Export Index at historic low

HONG KONG - As the trade dispute between the United States and Mainland China continues and the world economy beings to slow, the Hong Kong Trade Development Council (HKTDC) has made a further downward revision to its forecast for Hong Kong's export performance in 2019, saying the city's exports will decline 4% by value this year.

HKTDC Director of Research Nicholas Kwan said today that the United States had imposed tariffs on almost all goods imported from the mainland. "Inevitably, this will have an impact on Hong Kong's exports to the US," he sad.

"Local traders should look to capture opportunities among the challenges and hasten their pace of expansion into emerging economies such as the ASEAN countries, Latin America and the Middle East.

"Hong Kong's exports to these markets are growing steadily, with ASEAN recently surpassing the US as the city's second-largest export market."

In the first seven months of 2019, Hong Kong exports to ASEAN markets climbed 4.6% year-on-year, while those to the US fell 10.9%.

Under the current restructuring of the global supply chain, Mr Kwan said Hong Kong manufacturers could consider setting up new production bases in countries along the Belt and Road.

The HKTDC's latest study shows that more than half of local exporters surveyed have been negatively affected by the current trade friction, with shrinking order sizes (73.4%), price bargaining (44.1%), and cancelled orders (26.6%) the most common consequences. A total of 27.7% of respondents said they need to share additional tariff costs with buyers.

Hong Kong traders have adopted different strategies to cope with these business challenges.

In addition to "develop in non-US market" (45.3%), manufacturers have "lowered unit prices" (23.9%), "moved production/sourcing bases" (23.4%), "downsized the company" (19.9%) and "lowered the minimum order quantity (MOQ)" (14.9%)

"It is worth noting that the reduction or cancellation of orders and price reductions is more serious than before," Kwan said.

"Among Hong Kong companies surveyed that have relocated their production or sourcing bases, 32.7%  have shifted activity to Vietnam, 16.4% to Cambodia and 10.9% to India. This will impact Hong Kong companies that provide trade-related services."

HKTDC Assistant Principal Economist (Greater China) Alice Tsang said today that the HKTDC Export Index fell 9.9 points to 27.4 in the third quarter of 2019, close to the historic low experienced during the financial turmoil in 2008.

"The indices of various industries and markets have fallen across the board, reflecting that Hong Kong exporters are generally bearish on export prospects," she said.

www.hktdc.org (ATI).